2010 (8) TMI 960 - HC - Income Tax

Substantial question of law u/s 260A ibid - Addition of income from unexplained source u/s 68 - addition reversed by CIT (A) and Tribunal - HELD THAT - In our opinion, once the CIT (A) and Tribunal accepted the explanation of assessee and accordingly, deleted certain additions made by AO holding the transaction of shares to be genuine, then it would not involve any substantial issue of law as such. This Court in its appellate jurisdiction under section 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT (Appeals) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance on the documents filed by assessee. As a consequence thereof, the additions made by Assessing Officer came to be deleted. As submission was dealt with by Tribunal and negatived finding no merit therein and lastly when the issue on this fact was examined and finding recorded then unless it constitutes a substantial question of law, the same cannot be entertained in appeal under section 260A. It is in our opinion, amounts to re-appraisal of evidence already done by two appellate courts and hence third appellate court would not do it.Appeal dismissed.

Summary

Issues:
- Interpretation of section 260A of the Income-tax Act
- Consideration of substantial question of law in an intra court appeal
- Addition/deletion of amount in the hands of the assessee for assessment year 2005-06
- Examination of explanation offered by the assessee regarding source of income
- Acceptance of explanation by the CIT (Appeals) and Tribunal
- Reliance on documentary evidence by the Tribunal
- Rejection of Assessing Officer's addition based on explanation and evidence
- Dismissal of revenue's appeal by the Tribunal
- Appellate jurisdiction of the High Court under section 260A
- Re-appraisal of evidence by the High Court

Analysis:

The High Court of Rajasthan heard an intra court appeal filed by the Income-tax Department under section 260A of the Income-tax Act against an order passed by ITAT, Jaipur. The appeal concerned the addition/deletion of an amount of Rs. 17,01,652 in the hands of the assessee for the assessment year 2005-06. The Assessing Officer had treated the transaction of shares as bogus and added the amount to the total income, which was later reversed by the CIT (Appeals) and upheld by the Tribunal. The Tribunal accepted the explanation provided by the assessee, supported by documentary evidence, and dismissed the revenue's appeal. The High Court was tasked with determining whether the appeal involved any substantial question of law under section 260A of the Income-tax Act.

The High Court noted that the Tribunal extensively examined the explanation offered by the assessee and accepted it based on the documents submitted. The concurrent findings of the CIT (Appeals) and Tribunal on the genuineness of the transaction were considered binding. The High Court emphasized that it could not re-examine factual issues or draw inferences based on the assessee's explanation. The Court clarified that unless the findings were entirely baseless or against the law, no substantial question of law would arise. The High Court found no error in the Tribunal's decision to delete the additions made by the Assessing Officer.

The appellant contended that reliance on a letter from D.S. Exchange questioning the transaction's correctness justified the Assessing Officer's addition. However, the High Court rejected this argument, stating that it did not constitute a substantial question of law and amounted to re-appraisal of evidence already considered by the appellate courts. The Court also dismissed the appellant's reliance on a specific case, emphasizing that each case's facts were crucial in determining the proper exercise of appellate jurisdiction.

Ultimately, the High Court concluded that the Tribunal had appropriately exercised its appellate powers in considering the facts of the case. As a result, the appeal was dismissed in limine, with the Court holding that it did not involve any substantial question of law. No costs were awarded in the judgment.